E-mini S&P (March)
Yesterday’s close: Settled at 2796.25
Fundamentals: The S&P settled at the low end of its range yesterday but has recovered firmly into this morning with the technicals laying a roadmap. Equity markets seem to be either unconcerned or outright doubting that the government could shut down at midnight tonight. Let’s take a brief stroll down memory lane and visit recent price action due to political hurdles. Beginning with the Brexit, equity markets sold off sharply but began a recovery within one week. On the 2016 presidential election results, markets sold off sharply, in fact the S&P was limit down. But you would have missed it if you blinked, the S&P closed higher on the session! The lead up to the French election did cause some minor pressures but once the result was known, equity markets gapped higher on the Sunday night open; the NQ set a new all-time high. The healthcare vote was the next hurdle and yes it caused some volatility, but nothing was even accomplished and once the ship had sailed, the S&P was then setting a new all-time high. The point is, investors are looking for reasons to buy and try to do so ahead of whatever imaginable curve this market still has. What do we mean? Shorts better look out when a budget deal is reached. Today we have Michigan Consumer data at 9:00 am CT.
Technicals: The levels have played well this week with yesterday’s low of 2793.75 coming in against first key support at 2794.25. Major three-star resistance at 2807-2809.50 remains a hurdle but a close out above here combined with a budget deal should send this market on a path to 2847.75. We would like to see a close above the minor 2800 level on a psychological basis to leave the bulls with an upper-hand to close out the week. Remember, Russell 2000 major three-star level is 1562-1564, you can buy into here, but if it breaks so should the rest of the market.
Bias: Bullish
Resistance – 2807-2809.50***, 2828**, 2847.75***
Support – 2800*, 2794.25**, 2788.75-2789.25**, 2783.50-2784.50**, 2769-2771.75***
Crude Oil (March)
Yesterday’s close: Settled at 63.89
Fundamentals: The IEA released their Monthly Report this morning and said that this year could be a historic one with the U.S in a position to overtake Saudi Arabia and Russia as the world’s largest producer. They expect to see “relentless growth” from U.S shale with prices at these levels. Price action has responded, seeing continued pressure against a crucial support level this morning. Yesterday’s weekly EIA inventory report was on the bullish side with a drawdown of 6.86 mb nearly doubling expectations. Furthermore, the recover in production was shallow. U.S production dipped by 290,000 bpd two weeks ago but only 258,000 came back online last week (Alaska did drag this by 9,000 bpd). This gave us reason to tread the waters with caution yesterday. Today is Friday and price action has been friendly on Fridays. We began to reintroduce a Bearish Bias this week, but do remain cautious through the end of the week and until the $63 mark is closed below. However, the market could not rally on bullish news yesterday and this could signal that the record long position is finally tired out.
Technicals: We are getting a little more aggressive with our Bearish Bias. The recent consolidation from the lows on 1/12 and the highs on 1/16 has created a small wedge pattern on the daily and today’s bar has bearishly fallen through here. We want to exude caution until a close below major three-star support and the weekly trend line. A close below here could provide a relief that tests near $60. The bulls have been extremely aggressive but yesterday’s failure to maintain higher price action and failure on the retest against first resistance after that EIA read has opened the door for profit taking from smart longs.
Bias: Bearish/Neutral
Resistance – 63.90**, 64.23-64.28**, 64.83-64.89**, 66.87***, 68.43**
Support – 63.00-63.25***, 62.43**, 61.87**, 59.96-60.45***
Gold (February)
Yesterday’s close: Settled at 1327.2
Fundamentals: Gold has firmed up into today’s midnight budget deadline to keep the government open. The Dollar has been weak for weeks, months and all of 2017. The budget news is just the latest catalyst but let’s not interpret this as the only catalyst. Even if a deal is reached, we expect to see continued Dollar weakness. Traders should keep in mind that the next two weeks will be very critical for both the currency and Gold trade; next week is the ECB and the following week is a gauntlet of US data along with a Fed meeting. Michigan Consumer data is due at 9:00 am CT.
Technicals: Price action remains very favorable and this is undeniable. Pullbacks are shallow and short-lived. What is also undeniable is the overheated net-long position and a 14-day RSI that sits near 70 (though it saw some relief after yesterday). We remain unequivocally Bullish but because of this we have kept a slight Neutralization. Support levels were taken out yesterday and it did encourage a wave of selling, still, Gold has recovered very well into today. We are watching the 1335.8 level along with last week’s close of 1334.9; we would like to see the metal maintain this level on a closing basis. A move back below 1330.5 should spark a wave of selling. To the upside we have introduced another major three-star resistance at 1350, this is the trend line from the 2016 high that has slowly worked lower.
Bias: Bullish/Neutral
Resistance – 1340.9*, 1345**, 1350***, 1358-1365***
Pivot – 1334.9-1335.8
Support – 1330.5**, 1321.6**, 1307.1-1308.9**, 1302-1303.4***
Natural Gas (February)
Yesterday’s close: Settled at 3.189
Fundamentals: Yesterday’s storage reports showed less of a draw than expected at -183 bcf versus -199 bcf. Prices dipped but quickly recovered to settle back at the pivotal 3.199 level ahead of a weekend that had begun to price in a warmer front. As stockpile draws mounted through midweek, price action stalled technically but also as some forecasters now had temperatures rising just a little. Regardless, the mix and uncertainty are keeping a premium in the market while storage levels are seeing an unprecedented drawdown this month.
Technicals: As usual, the month of January has brought a tremendous amount of volatility in Natural Gas. However, options expiration for the February contract is next Friday and we expect volatility to begin to seep out of the market. Big bets on both sides of the market signal a nice consolidation phase ahead and around the 3.199 level. This would keep price action confined for the most part between the 100 and 200 day moving averages.
Bias: Neutral
Resistance – 3.258-3.288***, 3.43***
Pivot – 3.199
Support – 3.115-3.134**, 3.039** 2.971-2.989***
10-year (March)
Yesterday’s close: Settled at 122’145
Fundamentals: The 10-year is set for the lowest weekly close since June 27, 2011. This comes in the face of a potential government shutdown. Rates are truly focused on next week’s ECB Meeting and the Fed Meeting the week after. Ultimately, we believe once we get these fundamental hurdles out of the way, we could see a tremendous buy opportunity. Michigan Consumer data is due at 9:00 am CT today.
Technicals: With a close below major four-star support this week, you are either Bearish or Neutral. Price action is fishing for a bottom and we have a level to watch at 122’125. The technicals are very weak but at the same time the pendulum is swinging to one-side. Fundamentally and technically, we believe a buy opportunity is not too far around the corner.
Bias: Neutral
Resistance – 123’10-123’135**, 123’215**, 123’27-123’28**, 124’01*, 124’06-124’07
Pivot – 122’245-122’29****
Support – 122’125**, 121’25**, 119’20-120****
For more information please contact DAW Trading at brokersedge@dawtradingdiv.com or at 877-329-0006 and visit us at https://dawtradingdiv.com/brokers-edge/
Disclaimer:
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. DAW Trading (“DAW”) uses various outside sources for research material regarding futures and options on futures trading therefore the views and opinions expressed in this letter may not necessarily reflect the view of DAW or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to DAW.